Posts Tagged ‘yammer

24
Oct
08

Microblogging is still unprofitable: Why Can’t Twitter turn a profit?

Yammer has managed to start monetizing and is turning somewhere around the area of $200 a month in profit…. not exactly setting the world on fire, but they’re doing a damn site better than Twitter, who are still burning through venture capitalist’s money & are yet to turn a profit. With what are probably now the world’s 2 biggest microblogging platforms both unable to turn a reasonable profit, one has to ask – What is the best way for a microblogging service to turn a profit…

//blog.compete.com/2008/05/15/twitter-traffic-growth-usage-demographics/The first thought that pops into one’s head is “Ads”. Seems every man-and-dog wants to give people something for free / have it ad-funded these days. Which is great, but free (or more specifically, ad-funded) services have a snag – despite common perception, there is simply not a bottomless supply of Internet ads for us to roll out anywhere we like. The boom days of adding some adserver script to your blog / page and watching the dollars roll in are coming to a close. With tough economic times ahead, advertisers will move to either (1) online places where click-through rates on ads are proven to be the highest, or (2) where they can deploy a pay-per-click arrangement so they are not paying for ads that don’t work.

Twitter is neither of these places… firstly, Twitter’s user base tends to be cool-as-ice Gen-Y (see the graph I ‘borrowed’ from the Compete blog) who we know are skeptical of non-targeted advertisements. They have also been shown to modify their surfing behaviour in order to avoid / ignore ads. There goes the pay per click idea – click through rates will typically be pretty low, so Twitter’s income is limited if they choose pay-per-click.

Secondly, Twitter does not keep anywhere near enough data on it’s users to build user profiles robust enough to serve targeted ads well… if you have a look at your Twitter profile, the information they have actually collected is incredibly sparse. However, this second point is perhaps where Twitter’s opportunity for monetisation lies. Should it partner with someone like Microsoft or Google to do a meta-analysis of what individual users tweet about and then try to build profiles of Twitterers based on that, the targeted ad idea may yet work – at the very least, it will give Twitter and advertisers a good idea of products individual Twitterers might be interested in, and allow them to serve ads accordingly. The only problem is, it will take a partner the size of Microsoft or Google to supply the computing power required to make any sense of the tens of millions of tweets per day. I’m sure both companies would jump at the chance though (if anyone from MS or Google reads this and runs with that idea, you can check my about page for contacts details so you can send me my check:)).

Then, there are a whole host of other ideas… sponsored backgrounds like Photobucket have done, fees for additional/premium additions to your free service a la Flickr, subscription fees a la some of the premier tech support forums… or does Twitter even really need to turn a profit? Interested to hear other ideas…

UPDATE: there’s more on this topic in one of my more recent posts at http://marketingisadirtyword.com/2009/01/16/best-friends-for-life-for-1-twitters-profit-potential-is-still-looking-shaky/




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